Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey there,
Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland.
Speaker 1: I'm an executive producer with iHeart Podcasts and how the
Speaker 1: tech are you? So? Here in America, the sport of
Speaker 1: American football, whereas we call it football, is back in
Speaker 1: full swing. And I heard a little rumor that tonight
Speaker 1: during Monday Night football, PayPal's going to do something that's
Speaker 1: something is I have no idea. I've heard that's going
Speaker 1: to be entertaining and funny, and maybe it'll tie into
Speaker 1: a recent ad they did with Will Ferrell where he
Speaker 1: runs into a bunch of wind chimes. Don't know for sure,
Speaker 1: but I do know that if you tune into the
Speaker 1: game on ESPN, you can actually see whatever this is unfold.
Speaker 1: And I think the hope is that this is going
Speaker 1: to be a big talking point, and I'm certainly curious.
Speaker 1: But in the meantime, I thought it would be cool
Speaker 1: to talk about the origins and evolution of PayPal. So
Speaker 1: this is kind of a high overview, mostly about the
Speaker 1: formation of PayPal and then a little bit about its
Speaker 1: evolution because this is a topic that I've actually touched
Speaker 1: on a few times in tech stuff while talking about
Speaker 1: other companies, primarily eBay, or when I was talking about
Speaker 1: the origins of Elon Musk's obsession with the letter X,
Speaker 1: because that actually plays a big part of it too,
Speaker 1: But I have never done a full episode dedicated to
Speaker 1: the fintech company that set the standard for everybody else,
Speaker 1: Like PayPal is a pretty remarkable success story, especially when
Speaker 1: you expand that out to say, okay, let's look at
Speaker 1: some of the influential figures who are part of PayPal's founding.
Speaker 1: They largely went on to do lots of other stuff
Speaker 1: and become really really wealthy in the process. But in
Speaker 1: the beginning, before there was PayPal, there were two other entities,
Speaker 1: so starting first with one called Confinity, although even this
Speaker 1: company reportedly had an earlier name called field Link, that
Speaker 1: was co founded by Max Levchin and Peter Tiel in
Speaker 1: nineteen ninety eight with a few other partners. Although Levchin
Speaker 1: and tel are typically the only two you read about
Speaker 1: in most histories, they weren't the only ones, but they
Speaker 1: were the ones that were, you know, referenced the most. So.
Speaker 1: Levchin was born in Ukraine in nineteen seventy five. His
Speaker 1: family immigrated to the United States in the early nineties.
Speaker 1: He was interested in computer science, and he earned a
Speaker 1: degree in the field of computer science at the University
Speaker 1: of Illinois at Urbana Champaign in nineteen ninety seven, and
Speaker 1: then like the next year, he would co found this
Speaker 1: company that would eventually evolve into PayPal, which is quite
Speaker 1: a stratospheric rise. I mean, to go from a rush
Speaker 1: college graduate to co founding a blockbuster of a company
Speaker 1: in just a year, that's incredible. Of course, we also
Speaker 1: know lots and lots of stories in Silicon Valley about
Speaker 1: college dropouts who go on to forge incredibly successful entrepreneurial careers.
Speaker 1: Just a quick reminder, for every great success story there is,
Speaker 1: there are countless stories of people who dropped out of
Speaker 1: college and then regretted it later. So it's by no
Speaker 1: means a guarantee. I mean, if you've got a really
Speaker 1: great idea and you're also lucky, then you know you
Speaker 1: might have a really good shot anyway. The other co
Speaker 1: founder Peter Tiel, he's almost a decade older than Lefchen.
Speaker 1: He was born in nineteen sixty seven, and he was
Speaker 1: born in what at that time was referred to as
Speaker 1: West Germany. We just call it Germany now because it
Speaker 1: unified again. He was just a year old when his
Speaker 1: family immigrated to the United States. Teel majored in philosophy
Speaker 1: at Stanford University, graduated in nineteen eighty nine, and he
Speaker 1: leaned heavily into libertarianism, and to this day, Teal is
Speaker 1: known as being a political activist as well as an entrepreneur.
Speaker 1: Levchen would successfully convince Teal to serve as the CEO
Speaker 1: for Confinity once it launched. Reportedly, Teal didn't want to
Speaker 1: do that initially, he just wanted to be an investor,
Speaker 1: but Levchen convinced him to serve as CEO. Now, there
Speaker 1: were four other co founders of Confinity, whom, as I
Speaker 1: mentioned earlier, they often don't get talked about nearly as
Speaker 1: much in the various articles and histories of PayPal, But
Speaker 1: those other four co founders included Upon ken Howery, Luke Nosek,
Speaker 1: and Russell Simmons, all of whom have earned the descriptor
Speaker 1: entrepreneur to say the least. So their goal, at least,
Speaker 1: as described by Fintech magazine, was to quote democratize financial
Speaker 1: services and empower people and businesses to join together and
Speaker 1: exchange value for better experiences end quote. But that doesn't
Speaker 1: really mean much, right, Like I mean, yeah, it tells
Speaker 1: you what the end goal is, but it doesn't tell
Speaker 1: you through which methods are they planning to achieve this goal.
Speaker 1: So I would argue this gets maybe a tiny bit confusing.
Speaker 1: So on a more specific and perhaps less grandiose level,
Speaker 1: the original aim of Confinity was to develop a payments
Speaker 1: platform built on top of the palm pilot. And you
Speaker 1: may not remember what these devices were if you are
Speaker 1: younger than someone likes say myself. The smartphones made old
Speaker 1: personal digital assistants or PDAs obsolete, but way back in
Speaker 1: the day these things were like the go to tech
Speaker 1: accessory if you were in business. Palm pilots were a
Speaker 1: type of PDA. So these are digital devices that could
Speaker 1: access stuff like email and contacts and calendars and that
Speaker 1: kind of thing. Often they didn't have any direct Internet
Speaker 1: connectivity on their own. What you would do is you
Speaker 1: would sync your device to a computer that did potentially
Speaker 1: connect to the Internet, and you would do this through
Speaker 1: various means. It might be through a cable, or it
Speaker 1: could be through an infrared sensor. A lot of them
Speaker 1: had those including the palm pilot, and you would carry
Speaker 1: this around with you, and while it didn't have all
Speaker 1: the capabilities of a smartphone, it did boost what you
Speaker 1: could do just on a regular cell phone. So business
Speaker 1: leaders would typically have each of these types of devices.
Speaker 1: So it's no big surprise that gradually PDAs and cell
Speaker 1: phones would converge into the form factor of smartphone, and
Speaker 1: then it would take a few more years for smartphones
Speaker 1: to become a consumer product beyond just the business elite. Anyway,
Speaker 1: Levchin and Teal were essentially trying to make a product
Speaker 1: that would let business leaders exchange money digitally through mobile devices,
Speaker 1: and the way this would work was through beaming data
Speaker 1: through infrared signals. So, like I said, they had infrared
Speaker 1: lights and infrared sensors, sort of like a television remote,
Speaker 1: but you know, TV remotes typically only just beam stuff
Speaker 1: to a receiver connected to your TV. In this case,
Speaker 1: the palm pilots had both the sending and receiving elements,
Speaker 1: so it's like a transceiver. So you had to point
Speaker 1: the devices toward each other, you know, you had to
Speaker 1: have a line of sight between the two palm pilots
Speaker 1: in order to make one of these transfers happen. Once
Speaker 1: you did that, you still had another step to take.
Speaker 1: Like you didn't just magically have money added into an account.
Speaker 1: What you would have to do is you would have
Speaker 1: to take your Palm pilot, synk it back to your computer,
Speaker 1: log into the Confinity website, and then you would choose
Speaker 1: how you wanted your money credited to you, like you
Speaker 1: could receive a credit like a credit card. Some Essentially
Speaker 1: you could have a check cut for you, so that
Speaker 1: means you gonna have to wait for the check to
Speaker 1: come to the mail, or you could do direct deposit
Speaker 1: to your bank account. It all depended on how much
Speaker 1: you trusted Confinity, I guess because in those early days,
Speaker 1: I think a lot of people forget this, but in
Speaker 1: the early days of e commerce, there was a lot
Speaker 1: of worry and anxiety around how would you handle digital
Speaker 1: transfers of money in a way that wouldn't put you
Speaker 1: at risk. Like no one wanted to put their credit
Speaker 1: card into a website, let alone have their bank account
Speaker 1: connected to an online service. So this wasn't a seamless
Speaker 1: service at this stage right the beaming of information between
Speaker 1: palm pilots, but it was the beginning of something Teal
Speaker 1: and Levchin saw that the world was likely going to
Speaker 1: move more toward a mobile landscape. It would take about
Speaker 1: a decade for that to actually happen, but it certainly did.
Speaker 1: You can't deny that the mobile web completely changed the
Speaker 1: way the Internet worked for the average person. So the
Speaker 1: name Confinity itself was a portmanteau of confidence and infinity.
Speaker 1: The team focused on cryptography because obviously it's necessary to
Speaker 1: protect any sort of financial transactions between mobile devices. You
Speaker 1: want to make sure that only the parties that are
Speaker 1: involved in the transaction are able to access that. You
Speaker 1: don't want anyone snooping in and being able to, you know, digitally,
Speaker 1: steal cash. They also worked on the concept of digital wallets,
Speaker 1: so a virtual account where you could keep deposits, withdrawals,
Speaker 1: and transfers in a way that was reliable and secure
Speaker 1: and didn't necessarily require you to constantly tap into that
Speaker 1: through like a more established financial institution to get like
Speaker 1: a check cut or something like that. So this would
Speaker 1: help reduce the number of steps needed to interface with
Speaker 1: money from a user perspective. Confinity developed a money transfer service,
Speaker 1: and this is the service that ended up getting the
Speaker 1: name PayPal. So originally PayPal was not the name of
Speaker 1: a company. It was just this service from Confinity. But
Speaker 1: as I mentioned earlier, Confinity was just one of two
Speaker 1: entities that ultimately would evolve into PayPal. There was, as
Speaker 1: Yoda might say, another sky Walker or you know, just
Speaker 1: another another company. That another company was the original X
Speaker 1: dot com. Well not the original X dot com actually,
Speaker 1: because X dot com existed before this did. This is complicated. Okay,
Speaker 1: so today, if you say x dot com, you're referring
Speaker 1: to the entity that was formerly known as Twitter. Now,
Speaker 1: at the time of PayPal's founding, X dot com was
Speaker 1: known as an online financial company. More on that than
Speaker 1: just a moment. But really, the original x dot com
Speaker 1: was neither of those things. It was instead the URL
Speaker 1: for a company called Pittsburgh Power Computer. I found that
Speaker 1: thanks to Jimmy Sony, who wrote a piece on Medium
Speaker 1: about the origins of X dot Com. He's also written
Speaker 1: extensively about various founders in Silicon Valley in a book
Speaker 1: called The Founders. Pretty handy there. Anyway, even this story
Speaker 1: gets more complicated, of course it does. So the owners
Speaker 1: of Pittsburgh Power Computer were in a jam, so they
Speaker 1: had established a website at www dot PPC dot com. However,
Speaker 1: they lost that URL after a company called Network Solutions
Speaker 1: bought out the contract for their domain hosting that granted
Speaker 1: them that address. So they reached out to Network Solutions
Speaker 1: to find out what other URLs they might be able
Speaker 1: to secure for themselves, and they found that www dot
Speaker 1: x dot com was available and they said, oh, we'll
Speaker 1: have that one please. Now, this almost didn't happen because
Speaker 1: while they were able to secure the URL from the
Speaker 1: DNS point of contact through the network company, their Internet
Speaker 1: service provider said that looks totally sus and we are
Speaker 1: not going to let you have it. However, the owners
Speaker 1: builled out the necessary paperwork to establish this as their URL,
Speaker 1: and whoever it was that objected to x dot com
Speaker 1: at their ISP must not have looked at the forum
Speaker 1: because when it was all sudden and done, they they
Speaker 1: were able to secure x dot com after all. Shortly thereafter,
Speaker 1: the Internet Assigned Numbers Authority scooped up all the remaining
Speaker 1: one letter URLs that were left. There were twenty three
Speaker 1: unassigned ones at that time. The ones that had been
Speaker 1: taken at that point were x, Q, and Z, So
Speaker 1: if the pair had even dawdled a little bit, they
Speaker 1: wouldn't have been able to get x dot com at all,
Speaker 1: because it would have been sort of a manifest destiny
Speaker 1: kind of land grab from the Iana. Anyway, the pair
Speaker 1: of business owners held onto this URL even though they
Speaker 1: ultimately sold the computer company. So they kept the URL
Speaker 1: after selling the company, and they kept it for stuff
Speaker 1: like their personal emails, because like having name at x
Speaker 1: dot com. That's kind of fun, right, And then we
Speaker 1: get up to nineteen ninety nine. That's when Elon Musk,
Speaker 1: who was fresh off of selling his first company, zip Too,
Speaker 1: popped up with an interest in buying the x dot
Speaker 1: com URL. He had not been the first person to
Speaker 1: approach the pair, but he was the first to have
Speaker 1: a pick that they actually found to be interesting, and
Speaker 1: that pitch was to bring investment and banking to the
Speaker 1: internet writ large. The early services would be similar to
Speaker 1: what Confinity would provide, like linking banking and transfers to
Speaker 1: email addresses, but Musk's grand plan was to get into
Speaker 1: all things financial, with x dot com being kind of
Speaker 1: a portal to everything you can think of in the
Speaker 1: finance world online. The former owners of x dot com
Speaker 1: accepted some cash and perhaps more importantly, a stake in
Speaker 1: Musk's company. And Musk groused about that last bit. He
Speaker 1: actually publicly groused about it in an article, but he
Speaker 1: agreed to the terms so that he could gain possession
Speaker 1: of x dot com, and initially X dot COM's focus
Speaker 1: was on being able to make payments online through email. Interestingly,
Speaker 1: Musk's HQ for X dot com was in an office
Speaker 1: building and the company occupying the office next door to
Speaker 1: them was you guessed it, Confinity. We'll talk more about
Speaker 1: that in just a moment, but first let's take a
Speaker 1: quick break to thank our sponsors. We're back, okay, before
Speaker 1: the break I had mentioned. Now we have two different
Speaker 1: fledgling fintech companies occupying office space literally next door to
Speaker 1: each other. Now, both companies had large scale plans to
Speaker 1: become like all encompassing online financial institutions, but they were
Speaker 1: taking slightly different pathways in order to get to that destination,
Speaker 1: and in the early days, they were not directly competing.
Speaker 1: They each offered complementary methods to process payments online, but
Speaker 1: they didn't directly overlap. They also chatted with each other
Speaker 1: a bit. According to the aforementioned Jimmy Sony. Each company,
Speaker 1: the employees felt like the employees of the other company
Speaker 1: were taking the wrong path. So essentially they were both saying, like, man,
Speaker 1: those lunkheads over next door, Gosh, they sure do have
Speaker 1: it wrong. And they had both groups saying this at
Speaker 1: the same time about the other ones. Anyway, we should
Speaker 1: also set the scene a little bit to remind ourselves
Speaker 1: of what the world was like, because this is the
Speaker 1: late nineteen nineties, right We were in an inflationary period
Speaker 1: of the dot com bubble. Like startups were going banana
Speaker 1: at this time. They were popping up all over the place.
Speaker 1: A lot of them were flush with cash, either from
Speaker 1: angel investors or going public really early on before they
Speaker 1: had much to show for it, and just getting flooded
Speaker 1: with you know, people buying tons of stock. And investors
Speaker 1: saw the Internet in general and the Web in particular
Speaker 1: as being the digital equivalent of a gold rush, so
Speaker 1: investors didn't want to be too late to the party
Speaker 1: or else they would miss out. So a lot of
Speaker 1: startups were getting injected with way too much money for
Speaker 1: their own good, and this would become undeniable once the
Speaker 1: bubble did begin to burst in like two thousand and
Speaker 1: two thousand and one, and at the time in the
Speaker 1: late nineties, it just seemed like even the sky wasn't
Speaker 1: the limit. There was no limit. The limit does not exist,
Speaker 1: as mean girls would tell you. But it turned out
Speaker 1: that the mean girls were being extra mean because the
Speaker 1: limit did exist, and people ran up against it pretty
Speaker 1: hardcore in two thousand and two thousand and one. But
Speaker 1: on top of that, in the environment, there was also
Speaker 1: this looming specter of Y two K. Now, in case
Speaker 1: you're not familiar with Y two K, maybe you were
Speaker 1: born after two thousand. You don't even know what the
Speaker 1: deal is with Y two K. Well, here's the short version.
Speaker 1: So early on in the days of computer coding, programmers
Speaker 1: would often take a shortcut if they had to include
Speaker 1: digits representing a year in their code. It's like a
Speaker 1: lot of different software would keep track of the year,
Speaker 1: and each year the digits would go up by a number,
Speaker 1: But rather than use four digits, which would take up
Speaker 1: more valuable space, they used two digits. I mean, why
Speaker 1: wouldn't they So Like, if you were a computer programmer
Speaker 1: in nineteen seventy seven, and you were right, some software
Speaker 1: you might designate the year just by seven to seven,
Speaker 1: and then the next year it would go up to
Speaker 1: seven eight. That sounds like a trifle, but keep in
Speaker 1: mind that, you know, computer science was really tied to
Speaker 1: what we could achieve through semiconductor design and manufacturing, and
Speaker 1: that in itself was progressing at a very steady rate,
Speaker 1: a fast rate, but steady, and computers were under tighter
Speaker 1: limitations than what we have today, so conserving space when
Speaker 1: you were coding was actually a priority. You couldn't just
Speaker 1: you know, be extravagant with the amount of code you
Speaker 1: were putting into your software. So this became a convention
Speaker 1: of using two digits to designate the year, help you
Speaker 1: save a little bit of time and pluss what everybody
Speaker 1: else was doing. And it stuck around even as the
Speaker 1: limitations in computing became less of a problems as we
Speaker 1: got to a point where we could afford to use
Speaker 1: four digits to designate a year or more if we wanted.
Speaker 1: But the convention was already in place, And meanwhile, I'm
Speaker 1: kept on advancing as time often does, and it meant
Speaker 1: that those two digit counters were getting closer to nine
Speaker 1: to nine, and that led people to say, huh, what's
Speaker 1: going to happen when the calendar turns to January first,
Speaker 1: two thousand and that was a huge question. Some folks
Speaker 1: thought nothing really important was going to happen. Others worried
Speaker 1: that it could mean global chaos. So in the financial world,
Speaker 1: for example, there were a lot of very understandable concerns
Speaker 1: because the worry was that the computer systems that were
Speaker 1: now responsible for financial operations around the world would suddenly
Speaker 1: interpret the two digits to mean that it had turned
Speaker 1: back to nineteen hundred again, and this in turn would
Speaker 1: affect all these calculations that depended in part on what
Speaker 1: year it was, So, for example, calculating the amount of
Speaker 1: interest an account was accruing, that could totally create an
Speaker 1: issue like no one knew what would happen either would
Speaker 1: it credit the wrong amount, would it take money away?
Speaker 1: Would it just crash the system? If suddenly the appeared
Speaker 1: to term back in time ninety nine years, what happens then?
Speaker 1: So people were worried that everything from total financial collapse
Speaker 1: to everyday appliances going haywire would occur. Thanks to these
Speaker 1: space saving measures. Some programmers that introduced decades earlier, but
Speaker 1: companies like Confinity and x dot Com they started up
Speaker 1: well after the world had started to worry about what
Speaker 1: might happen upon the dawn of two thousand. As such,
Speaker 1: they were able to anticipate and sidestep those issues, largely
Speaker 1: because they could take measures to make sure their systems
Speaker 1: would continue to operate as designed after we were done partying.
Speaker 1: Because it was nineteen ninety nine, so in a way,
Speaker 1: they were being looked at as the future of finance
Speaker 1: because unlike the established financial world, these weren't legacy companies
Speaker 1: like legacy institutions that were then attempting to digitize and
Speaker 1: become modern nice. They were in fact of the digital
Speaker 1: age themselves, and so they weren't burdened by this massive
Speaker 1: legacy of systems that may or may not be compatible
Speaker 1: in the new era. So that ended up being like
Speaker 1: a big selling point for both Confinity and x dot Com. Meanwhile,
Speaker 1: Confinity had landed a pretty sweet deal, and it was
Speaker 1: a deal that forced the company to pivot. But that
Speaker 1: pivot might have been what ensured its ultimate success, and
Speaker 1: that was partnering with a little online e commerce platform
Speaker 1: called eBay. So in the old days of eBay, users
Speaker 1: could put stuff up for auction and bid for stuff
Speaker 1: that was for auction. You could also eventually put in
Speaker 1: an actual buy price and just buy things outright rather
Speaker 1: than bidding for them. But once someone won this bidding war,
Speaker 1: even if they're the only one bidding on something, whatever
Speaker 1: it may be, well, then it was time for the
Speaker 1: person who won the auction to pay up. Except there
Speaker 1: was no digital means to transfer money. So originally on eBay,
Speaker 1: the deal was if you won an auction, you were
Speaker 1: expected to write a check to the seller and to
Speaker 1: send the check to them through the mail like the
Speaker 1: postal service, like a caveman, essentially, so obviously, this slowed
Speaker 1: things down considerably. Sellers had no incentive to send stuff
Speaker 1: right away because they didn't yet have cash in hand.
Speaker 1: They weren't guaranteed to have actually received a check yet. Meanwhile,
Speaker 1: the buyers might worry that they were sending a check
Speaker 1: off only to never receive that you know, he man, body, pillow,
Speaker 1: or whatever it was they were buying. Confinity's PayPal service
Speaker 1: sped things up considerably. eBay would urge customers to sign
Speaker 1: up for PayPal accounts to expedite payment. You know, you
Speaker 1: just connected your email to PayPal and then you could
Speaker 1: start depositing money into a PayPal account and use that
Speaker 1: to purchase stuff, and Confinity saw great success because lots
Speaker 1: of people on eBay preferred this to the old method
Speaker 1: of cutting a check and sending it through the mail,
Speaker 1: So PayPal and Confinity started to see a lot more
Speaker 1: folks sign up for service. Now, by this time x
Speaker 1: dot Com and Confinity were more directly competing with one another,
Speaker 1: and this meant that Confinity was doing pretty darn well.
Speaker 1: And I'm sure that rubbed musk the wrong way, but
Speaker 1: neither company was doing as well as it could have
Speaker 1: been because they were spending a lot of their time
Speaker 1: and effort in an attempt to out compete the other.
Speaker 1: And that just meant that they were trying to drink
Speaker 1: each other's milkshakes, and they could have been directing that
Speaker 1: attention toward fostering a stronger business. Gradually, the two Camps
Speaker 1: came to a realization that by merging the two companies together,
Speaker 1: they could bolster their services. They could combine where it
Speaker 1: made sense and incorporate the complementary features that each one
Speaker 1: offered to make a better product overall for customers, and
Speaker 1: that this would be a fifty to fifty partnership a
Speaker 1: true merger. Bill Harris, who had served as CEO of
Speaker 1: X dot Com leading up to this merger, would continue
Speaker 1: on as CEO of the newly merged company. Must would
Speaker 1: be a sort of co CEO. Peter Thiel, who had
Speaker 1: been CEO of Confinity, would become the executive vice president
Speaker 1: of finance, and Levchen would become the company's Chief Technology
Speaker 1: Officer or CTO. And initially the plan was that the
Speaker 1: Confinity brand name would ride off into the sunset. They
Speaker 1: were going to retire Confinity. The new company would instead
Speaker 1: be called not PayPal but X dot Com. PayPal would
Speaker 1: continue to be the name of the payment service, the
Speaker 1: money transfer service, but it would not be the name
Speaker 1: of the company, at least not initially. There were actually
Speaker 1: talks of rebranding the name of the service as ex
Speaker 1: hyphen PayPal, which seems confusing to me because you're like
Speaker 1: X PayPal, you mean something that used to be PayPal
Speaker 1: but isn't PayPal anymore. And in fact, the folks over
Speaker 1: at PayPal were not crazy about this idea. They did
Speaker 1: not agree with Elon Musk that X was the coolest
Speaker 1: letter in the alphabet and that everything should be named
Speaker 1: after X. Meanwhile, Musk was very much adamant on that,
Speaker 1: and things did not go very smoothly for this newly
Speaker 1: merged company. It turned out that there were a lot
Speaker 1: of disagreements between the various parties who were coming together
Speaker 1: to form this new entity. So Peter Thiel resigned as EVP,
Speaker 1: and Musk and the Board of Directors had Bill Harris
Speaker 1: removed as CEO and Musk took his place because Bill
Speaker 1: Harris was seen as not being focused enough on the
Speaker 1: technology side of things. From what I understand this is
Speaker 1: based off of various articles that were written well after
Speaker 1: all of this happened. Teal actually came back to the
Speaker 1: company after Bill Harris was removed as CEO, and Teal
Speaker 1: would become the chairman of the board of directors. Elon
Speaker 1: Musk began making some pretty hefty demands of the company,
Speaker 1: like really really aggressive goals, ones that would have been
Speaker 1: difficult to achieve both from a business standpoint and a
Speaker 1: technological standpoint. This might sound familiar because his style doesn't
Speaker 1: seem to have changed much over at formerly known as Twitter,
Speaker 1: where he has both reduced the staff dramatically through layoffs
Speaker 1: and also placed some really aggressive goals for the people
Speaker 1: who were left behind. Well, he was doing that over
Speaker 1: at X dot com as well, and he was really
Speaker 1: gung ho on that name, Like he was just absolutely
Speaker 1: fixated on X, thinking that it was the coolest letter
Speaker 1: and that this was going to really make people want
Speaker 1: to use the company's products and services. Other stakeholders were
Speaker 1: not so sure about that. They were worried that one,
Speaker 1: no one was going to know what X dot com
Speaker 1: was all about because the name was not particularly evocative
Speaker 1: of what it was doing anyway. And they were also
Speaker 1: more worried that people might think it was linked to
Speaker 1: pornography because of the designation of X rated movies. So
Speaker 1: they were worried like, one, they're not going to know
Speaker 1: what we do, and two, if they do think they
Speaker 1: know what we do, they're going to think it's pornography
Speaker 1: related and that's not the case. So what happens next
Speaker 1: has become something of internet legend, or really tech legend.
Speaker 1: The story goes that while Musk was traveling to Australia
Speaker 1: to celebrate his honeymoon with his first wife, Peter Teel
Speaker 1: organized the board of directors to remove Musk from the
Speaker 1: position of CEO so to hold a coup the way
Speaker 1: Musk did with Bill Harris and boot Musk from the company.
Speaker 1: So this was in two thousand. Also on the board
Speaker 1: of directors at that time was Rydehoff, who would go
Speaker 1: on to found the company LinkedIn. There are a lot
Speaker 1: of luminaries in the tech world wrapped up in the
Speaker 1: story of PayPal. We'll touch back on that before the
Speaker 1: end of this episode. So Musk was ousted, however, he
Speaker 1: retained his stake in the company and that would go
Speaker 1: on to make him really filthy rich. Now, to be clear,
Speaker 1: Musk was already rich, It's not like he was coming
Speaker 1: from humble beginnings, but this would be a really big boost.
Speaker 1: More on that than just a moment. But Peter Thiel
Speaker 1: took on the job of CEO, and ultimately the folks
Speaker 1: remaining at the company needed to figure out what they
Speaker 1: were going to call it. Confinity had been retired as
Speaker 1: a brand, and no one really felt like that was
Speaker 1: the strongest name X dot com everyone agreed was confusing
Speaker 1: and potentially self defeating, so they turned to the most
Speaker 1: successful service that the company had offered, and that was
Speaker 1: the one used by countless people on eBay. They chose
Speaker 1: to rename the company PayPal. Okay, we've got some more
Speaker 1: to talk about with PayPal's origins and a little bit
Speaker 1: about evolution, but first let's take another quick break. Okay,
Speaker 1: we're back. So between two thousand and two thousand and two,
Speaker 1: PayPal establishes its identity using the PayPal name for the company,
Speaker 1: and begins to innovate even further in the payment space
Speaker 1: and establish itself as a successful payments processing platform for eBay,
Speaker 1: and by two thousand and two, it was ready to
Speaker 1: hold an initial public offering an IPO, and thus become
Speaker 1: a publicly traded company on the stock market. Now, I
Speaker 1: often say that tech startups really all startups, but tech
Speaker 1: startups in particular usually have one of two goals. Either
Speaker 1: go public, which brings in tons of money through the
Speaker 1: stock market, and thus early investors angel investors can see
Speaker 1: a big return for supporting the company when it was
Speaker 1: a weedy little startup. Or option two, get acquired by
Speaker 1: a much larger company for hopefully a huge amount of
Speaker 1: cash that also allows early investors to see a really
Speaker 1: big return on their initial investment. PayPal actually managed to
Speaker 1: do both in two thousand and two. It went public
Speaker 1: in two thousand and two in February and raised more
Speaker 1: than seventy million dollars in the process. But that was
Speaker 1: chicken scratch. I mean, part of the reason it was
Speaker 1: chicken scratch is that this is two thousand and two.
Speaker 1: That means the world had already seen the dot com
Speaker 1: bubble burst at that point. So while the market was
Speaker 1: in recovery, the craze around tech stocks where it would
Speaker 1: rocket a stock to the moon, those were a thing
Speaker 1: of the past. PayPal still did well. It just didn't
Speaker 1: explode like the dot com companies that went public in
Speaker 1: the late nineties before everyone came to terms with reality.
Speaker 1: But then later in October two thousand and two, eBay
Speaker 1: made an offer that the shareholders couldn't refuse. So hasn't
Speaker 1: even been a publicly traded company for a year yet,
Speaker 1: and eBay says, we want to acquire you. And it
Speaker 1: ended up being for the princely sum of one point
Speaker 1: five billion dollars billion. With a B. PayPal would become
Speaker 1: the official payment provider for eBay. In the process, not
Speaker 1: just not just an option, it's the official one. The
Speaker 1: founders would all become millionaires. Musk was the largest shareholder.
Speaker 1: He would pocket a quarter of a billion dollars himself. Y'all,
Speaker 1: I would not mind getting tossed out of a company
Speaker 1: if it meant that a couple of years later I'd
Speaker 1: be paid two hundred and fifty million. Smack aarows. That
Speaker 1: seems like a fate I would welcome. Several of the
Speaker 1: co founders left the company upon the completion of this acquisition.
Speaker 1: So Max Levchin, who kind of was the guy who
Speaker 1: came up with the idea for Confinity in the first place,
Speaker 1: he left, and he would go on to found a
Speaker 1: media sharing service called Slide. Peter Thiel left and he
Speaker 1: founded a hedge fund called Clarium Capital, and then later
Speaker 1: on he founded the data analysis firm Palanteer, which all,
Speaker 1: that's a podcast topic that's just waiting to happen, but
Speaker 1: I'll leave it for now. The folks who were part
Speaker 1: of those early days at PayPal would a lot of
Speaker 1: them would go on to create some really large tech companies,
Speaker 1: or they would take existing tech companies and then boost
Speaker 1: them considerably. Musk did this. Like Musk gets credit for
Speaker 1: creating a lot of tech companies, but in many cases
Speaker 1: those were companies that were founded by other people, and
Speaker 1: then Musk kind of came in and sort of took
Speaker 1: them over. So like with Musk, you've got Tesla and SpaceX,
Speaker 1: and these days you have like x, Dot Ai and
Speaker 1: lots of others. With tel you've got Pal and Tier,
Speaker 1: which is that big data analytics company. You've got LinkedIn, YouTube,
Speaker 1: Yelp affirm. All of these came from people who had
Speaker 1: previously worked over at PayPal. The group of entrepreneurs who
Speaker 1: fostered PayPal into a company that eBay acquired for one
Speaker 1: point five billion became known as the PayPal Mafia. It's
Speaker 1: a group of business leaders who largely became serial entrepreneurs.
Speaker 1: They often invest in one another products and projects. Not always,
Speaker 1: but I mean there's a lot of cross pollination going
Speaker 1: on between the group, and so they were just seen
Speaker 1: as this incredibly influential and powerful group of tech business
Speaker 1: owners who went on to create success after success. Several
Speaker 1: of them today are billionaires, So that is a heck
Speaker 1: of an alumni to belong to. As for PayPal, under
Speaker 1: the operation of eBay, it actually largely got to operate
Speaker 1: as an independent entity. It was not micromanaged by eBay
Speaker 1: for the most part, so there was a lot of
Speaker 1: innovation in digital payments, and PayPal as a result, continued
Speaker 1: to grow its influence. It began to find its way
Speaker 1: into lots of different types of storefronts, not just eBay. Meanwhile,
Speaker 1: eBay itself was starting to encounter a few challenges with
Speaker 1: PayPal flourishing while eBay was not growing as quickly. One
Speaker 1: investor in particular began to push for the two to
Speaker 1: part ways more than a decade after they first joined.
Speaker 1: So in twenty fourteen, Carl Icon, who is often referred
Speaker 1: to as an activist investor, which means he invests a lot,
Speaker 1: like he buys a lot of shares of companies, and
Speaker 1: that gives him pretty powerful rights as a shareholder to
Speaker 1: tell companies what they should do, and he gets kind
Speaker 1: of irritated if they don't do it. Anyway, That's what
Speaker 1: he was known for. He called on eBay to spin
Speaker 1: off PayPal, and he argued that PayPal was doing well,
Speaker 1: but it would do even better if it were freed
Speaker 1: from the corporate oversight of eBay, that eBay was essentially
Speaker 1: holding PayPal back. Now. eBay's board of directors initially dismissed
Speaker 1: this suggestion, but then later in twenty fourteen, they kind
Speaker 1: of came around to the same conclusion, and in twenty fifteen,
Speaker 1: eBay did in fact spin PayPal off and PayPal once
Speaker 1: again became a publicly traded company on the stock market.
Speaker 1: So it had done that in February two thousand and two,
Speaker 1: and then in twenty fifteen it would come back to
Speaker 1: the stock market as its own company. PayPal continued to
Speaker 1: offer news services, and like I said, lots of storefronts
Speaker 1: began to use PayPal as at least a payment option
Speaker 1: for customers, if not the only one. Interestingly, in twenty
Speaker 1: twenty one, eBay announced it would end support for sellers
Speaker 1: to use PayPal accounts in order to handle funds. You
Speaker 1: can still use PayPal to buy stuff on eBay, but
Speaker 1: the people selling it, they wouldn't collect the funds in
Speaker 1: their PayPal accounts. Instead, those funds would have to be
Speaker 1: directed to their bank accounts. This would mean that eBay
Speaker 1: would be able to institute a processing fee for each
Speaker 1: of those transactions, which was I think thirty cents plus
Speaker 1: a percentage of however much the transaction was. And that
Speaker 1: really is the reason for this, right eBay decided to
Speaker 1: get rid of PayPal because PayPal was getting those transaction fees.
Speaker 1: This way, eBay could get those transaction fees and PayPal
Speaker 1: would not have access to that anymore. You can still
Speaker 1: again purchase through PayPal, like if you go on eBay
Speaker 1: today and you want to buy something, you can use
Speaker 1: PayPal to complete your half of the transaction, but on
Speaker 1: the back end of the seller side, it was a
Speaker 1: different story. Over the years, PayPal has formed partnerships with
Speaker 1: many other financial institutions, which gives it, you know, definitely
Speaker 1: the era of legitimacy right Like Initially, there was a
Speaker 1: lot of skepticism about digital money companies, Like there was
Speaker 1: just a lot of fear that these things would be
Speaker 1: a flash in the pan and then ultimately you would
Speaker 1: have investors and customers left holding the bag when it
Speaker 1: would fail. But PayPal stuck around and it formed partnerships
Speaker 1: with companies like credit card companies like Visa and MasterCard,
Speaker 1: and major banks like Wells Fargo, as well as with
Speaker 1: big tech companies like Google and Apple. So if you
Speaker 1: were to use Google Pay or Apple Pay, then PayPal
Speaker 1: would be incorporated into those offerings as well. It also
Speaker 1: acquired numerous other companies in the fintech space over the
Speaker 1: years and back In twenty twenty one, PayPal introduced the
Speaker 1: ability to pay for purchases using cryptocurrency, So again, pretty innovative.
Speaker 1: I mean, I still have issues of cryptocurrency not really
Speaker 1: acting much like a currency, well, specifically Bitcoin. Other cryptocurrencies
Speaker 1: are a little more stable. Bitcoin, though, is so volatile
Speaker 1: that I don't really see it being used as a
Speaker 1: currency in a way that makes anyone feel comfortable. Anyway. Also,
Speaker 1: I've heard some younger folks say they don't like PayPal,
Speaker 1: they don't trust PayPal. Instead they use Venmo, which, well,
Speaker 1: I got some bad news for you if that's your
Speaker 1: point of view, because Venmo has been part of PayPal
Speaker 1: since twenty thirteen. It didn't start that way. Venmo was
Speaker 1: a service created by another company in two thousand and eight,
Speaker 1: two thousand and nine, somewhere around there. But in twenty thirteen,
Speaker 1: PayPal bought that company, so Venmo is a subsidiary of PayPal.
Speaker 1: If you think that Venmo is more trustworthy than PayPal,
Speaker 1: you just need to know that they're all the calls
Speaker 1: coming from inside the house. Anyway. PayPal has also been
Speaker 1: the center of a few different controversies, more than a few.
Speaker 1: I mean, any company that has been around for a
Speaker 1: while certainly has had a few. But if you're a
Speaker 1: financial company, well, for one thing, you got a big
Speaker 1: target painted on you, right like, if you are handling
Speaker 1: digital payments, hackers are going to want to try and
Speaker 1: find a way to get access to that. You know,
Speaker 1: it's essentially a digital bank robbery. But apart from the
Speaker 1: fact that PayPal is constantly having to invest in security
Speaker 1: because of its attractiveness as a target, there are also
Speaker 1: other issues. There have been a couple of data breaches.
Speaker 1: There was one in twenty seventeen that leaked the personal
Speaker 1: identifiable information of more than one and a half million customers.
Speaker 1: That's not great. In twenty fifteen, there was a really
Speaker 1: nasty case where the US Treasury Department pursued PayPal because
Speaker 1: they were accused of processing payments that were for illegal activities,
Speaker 1: including things like black market nuclear weapons, which is a
Speaker 1: big old yaoza. So, like a lot of cryptocurrency companies
Speaker 1: that are under scrutiny for similar situations, PayPal had to
Speaker 1: deal with that as well. Today the market cap for
Speaker 1: PayPal is more than seventy billion dollars. That's not too shabby,
Speaker 1: And as I said, a lot of the people who
Speaker 1: were involved in PayPal in the early days, they went
Speaker 1: on to create some of the most influential companies in
Speaker 1: the tech sector. Even those who were staying with PayPal,
Speaker 1: you know, the ones who didn't necessarily become millionaires overnight
Speaker 1: when eBay purchased PayPal, the ones who were there when
Speaker 1: eBay spun PayPal back off. A lot of them became
Speaker 1: millionaires when PayPal became publicly traded. And you know, people
Speaker 1: who had been compensated in part through stock options. If
Speaker 1: they executed those options, they could have walked away with
Speaker 1: quite a bit of money too. So PayPal has certainly
Speaker 1: fueled quite a few people's personal wealth as well as
Speaker 1: a lot of my purchases of vinyl online. PayPal's kind
Speaker 1: of my way to go for that. So yeah, that's
Speaker 1: a quick look at the birth and evolution of PayPal.
Speaker 1: There's a lot more we could talk about. I mean,
Speaker 1: a lot obviously happened between two thousand and two and today,
Speaker 1: way too much for just one episode. A lot of
Speaker 1: that ends up being kind of the growing pains of
Speaker 1: a division underneath a larger company. That's something that I
Speaker 1: have experienced personally as well, having been part of how
Speaker 1: stuff works, and then that was purchased by Discovery Communications.
Speaker 1: That was me getting a first hand experience of what
Speaker 1: it's like to be part of a company that was
Speaker 1: once really nimble and agile and then incorporated into a
Speaker 1: much larger corporation. PayPal kind of saw similar things, although
Speaker 1: obviously the details were totally different. But yeah, maybe I'll
Speaker 1: do another episode where I'll specifically talk about what happened
Speaker 1: at PayPal under the umbrella of eBay, beyond just the
Speaker 1: highlights that I touched on in this episode. But that's
Speaker 1: it for today's episode of Tech Stuff, A quick look
Speaker 1: at the history of PayPal. Just a quick reminder. Like
Speaker 1: I said, there's apparently going to be some sort of
Speaker 1: cool slash funny thing going on during Monday night football
Speaker 1: on ESPN involving PayPal, and I'm certainly curious as to
Speaker 1: what that might be. It's not often that I hear
Speaker 1: buzz and get a chance to pass it on to
Speaker 1: everybody else, but this is one of those cases where
Speaker 1: I have heard the buzz, so I wanted to communicate
Speaker 1: it to all of y'all. Anyway. In the meantime, I
Speaker 1: hope everyone out there is doing well and I'll talk
Speaker 1: to you again really soon. Tech Stuff is an iHeartRadio production.
Speaker 1: For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts,
Speaker 1: or wherever you listen to your favorite shows. You